Verizon Numbers Point to More Wireless Competition

Is the long locked-up U.S. wireless market starting to see some signs of real competition?

Some analysts think so after poring over earnings from Verizon Communications, which controls the country’s largest mobile phone carrier, Verizon Wireless. The culprit? A recently revitalized T-Mobile. The carrier had been a consistent supplier of customers to its rivals, but appears to be a more formidable player after merging with MetroPCS, securing the iPhone and launching new price plans and marketing efforts.

New Street Research analyst Jonathan Chaplin thinks he sees the effect of the new T-Mobile in Verizon’s wireless profitability, which was less than some on Wall Street had expected. He thinks that’s because the company had to spend more to capture customers.

“We suspect that the increased competitive intensity that has taken hold since TMUS launched the iPhone is affecting even VZ,” Chaplin said, referring to T-Mobile and Verizon by their stock ticker symbols. While Verizon is pretty insulated from others trying to steal its customers, Chaplin warned the results suggest “they are not completely above the fray.”

Macquarie Capital analyst Kevin Smithen also believes a 7% increase in Verizon’s selling, general and administrative costs probably came from marketing spending to counter T-Mobile’s efforts.

Verizon Wireless continues in the aggregate to outperform its rivals. The carrier added 941,000 contract customers in the quarter, and churn for customers on contracts was under 1%.

For its part, Verizon denies that its wireless business saw any impact at all from competition in the quarter. Chief Financial Officer Fran Shammo said the company was positive on its porting ratios–the amount of customers coming versus leaving with their cellphone numbers–with all of the major competitors.

Still, if you carry a mobile phone, the results may carry a hint of good news. Wireless bills have been growing for years as the industry has consolidated. Sprint is also poised to become more aggressive now that it has completed its takeover by Japan’s SoftBank.

All this jockeying–including a recent boast by T-Mobile that it is stealing share from competitors in certain regions–raises the attention on AT&T 's quarterly report due Tuesday.

Last month, AT&T projected it would add about 500,000 wireless contract customers in the second quarter, more than the 320,000 it added a year-ago, but warned its wireless margins would take a hit from promotions.